American Electric Power’s primary business is the generation, transmission, and distribution of electricity. AEP mainly categorizes its operating segments as follows:
• Vertically Integrated Utilities
• Transmission & Distribution
• Generation & Marketing
Vertically Integrated Utilities segment
Within the Vertically Integrated Utilities segment, AEP centrally dispatches electricity to its Transmission and Distribution segments and manages overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight. Sales and transfers of generated power among its subsidiaries are based on predetermined contractual arrangements and agreements.
These vertically integrated utilities (XLU) (IDU) offer end-to-end operations from the generation, transmission, and distribution of power for sale to retail and wholesale customers through assets owned and operated by AEP Ohio, AEP Texas, Appalachian Power Company, Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company.
Transmission & Distribution segment
As power-saving after generation is uneconomical, power has to be transmitted to a nearby location for consumption. AEP manages its transmission and distribution of electricity to retail and wholesale customers through its subsidiaries Texas Central Company, Ohio Power Company, and AEP Texas North Company.
Over the past several decades, regulatory uncertainty in the electricity transmission domain has resulted in inadequate upgrades and expansions of the existing transmission system. However, AEP Transmission is aggressively investing in the future by creating the infrastructure needed for electric reliability and economic growth.
AEP has the nation’s largest electricity transmission network at 40,000 miles. The Southern Company (SO) manages of 27,000 miles of transmission network while Duke Energy (DUK) has 36,000 miles of network.